People often feel sorted with having a term life insurance and find no need to have permanent life insurance. However, you need to know that term insurance and permanent life insurance are different. Term life insurance is a temporary policy that does not give you a lifelong benefit. Converting term to permanent life insurance will be the best solution for you to have financial security beyond your life. You do not need to buy separate permanent life insurance if your term insurance is convertible. Policyholders often do not take the maximum advantage of a term life insurance by letting it get lapsed. Instead of buying new insurance, converting term to permanent life insurance is a better, affordable, and sustainable idea.
Why should you convert a term life policy to permanent life insurance?
1. There is a cash value of a permanent life insurance policy.
You can withdraw money while you are alive from a permanent life policy. This feature provides an assurance that you have an emergency fund available in times of crisis. However, these funds should be your last resort in a problem. If you tap them, then they will not be available for your family members after you die. Use it as a tax-free saving policy for your family members who might need them in your absence. Do not exhaust it until you have other sources of fundings.
2. Your term insurance will end with your demise.
Permanent life insurance is more like an investment you make for yourself because it has a cash value and your family. After all, it is available for them to use when you are no longer available. On the contrary, the term insurance you buy is more like car insurance or health insurance, which does not pay you until you file a claim or need some services.
Term insurance is a more affordable option, but you are likely to outlive it, which means that the insurer will not pay up for you. In case you are converting term to permanent life insurance, then your insurer will pay for a permanent life insurance policy for you.
3. You can always upgrade when you’re financially stable.
Usually, when starting, permanent life insurance can be an expensive option to invest in, especially if you have an ailment. When you find yourself in a better financial position with growing age, you can always upgrade your term insurance to permanent insurance. This policy will act as a savior for your family or emergency or retirement funds for you.
4. You have people who are financially dependent on you.
Consider permanent life insurance as a pool of funds for your children or other family members dependent on you financially, especially when your children need funds for their education or medical expenses, which are inevitable. Converting term to permanent life insurance will be beneficial for you because of its lock in rates. You pay a fixed rate until you die for permanent life insurance.
How can you convert term life insurance to permanent life insurance?
It is easier to convert your term insurance policy into a permanent policy rather than applying for a new one. To begin converting your policy, check the terms and conditions. Understand if the policy is convertible and what is the period within which you can convert it. Often insurers allow you to convert the policy at any point in time. However, there may be a time limit that you would not want to miss. Contact your insurer and express your interest in converting your term policy into a permanent policy. You will be asked to fill a questionnaire and understand the changes in terms and conditions. Within a few days you will be issued a new permanent policy which will be in continuation of your term insurance.
How much will it cost you to convert your policy?
Many factors will affect the cost of your new permanent life insurance policy. These factors are:
- The increase in premium which you will have to pay because permanent life insurance is more valuable and expensive than term insurance.
- Your age will be considered for deciding your premium. The older you are, the higher premium you have to pay. This is why it is suggested that you convert your term into permanent insurance at the earliest.
- You may choose to convert only a part of your full-term insurance into permanent insurance. Now, as per the amount you want to get insured, decide the premium you will have to pay. You will have to pay a lesser amount for availing fewer benefits.
What should you know while converting term to permanent life insurance?
If you are willing to convert your term insurance policy into a permanent life insurance policy, the following are the questions which you may ask:
- Often the term insurance policies can be converted into a permanent policy. However, you must confirm it.
- You will get a fixed time to convert the policy into a permanent life insurance policy. Ask for the deadline and act within that period.
- What options are available with you for policies. You would want to pick a policy which is in your budget and is also of good quality. You can visit RenewBuy and browse through a range of policies under one site. You will get competitive prices and transparent terms and conditions. It is wise to get a policy from an assured insurer. At RenewBuy, quality is our priority.
A permanent life insurance policy will give you the benefits of having financial support available for you until you are alive and for your dependents in your absence. It may be more expensive than having term life insurance; however, it is worth every penny you pay for it.